What is a care fees annuity, and do I need one?

Image showing a care fee annuity client  (Simon Emery @ SEA Photography)Not necessarily, but a Care fees annuity can provide a far greater income for a given amount invested, when compared with mainstream investments, and shouldn’t be confused with pension annuities which have had such a bad press recently for being poor value for money.

With a care fees annuity, you pay over a lump sum and in return you are guaranteed to receive a certain level of income for the rest of your life, which is then used to pay your care fees. If this is paid directly to the care provider, it is free of tax, and the level of income paid out is related to your state of health – so as most people needing care are, by definition, in less than perfect health, you will pay a smaller lump sum to secure a given level of income. The income can be fixed, or can rise each year, which helps to keep up with fee increases.

You would only need to arrange an annuity to meet the amount of your fees which is not covered by income from other sources, so could be supplementing your pension, and perhaps rental income.

The main advantage is that once you have bought the annuity, you have the peace of mind of knowing that your care fees are paid and the rest of your money is yours.